The Next Threat to Affordable Housing in New York City: Flood Insurance

Jolito Ortiz helps sweep water out of his friend’s apartment on the Lower East Side after Hurricane Sandy. (Photo by Andrew Burton/Getty Images)

Three years ago, the damage wrought by Hurricane Sandy led thousands of New York City homeowners—and their representatives in city government—to become better acquainted with a complicated subject: flood insurance. And they started paying attention just in time.

Coastal homeowners, from the edges of Manhattan to the outer boroughs, are set to see big increases to their annual flood insurance premiums in the next several years—in some cases up to and beyond $10,000 more a year, a burden that could make some neighborhoods that are already struggling to recover from the storm simply unaffordable. And in New York City, the typical fix—elevating a house above flood levels—isn’t feasible for almost half of the housing stock, leaving a city already grappling with an affordability crisis to chart new territory in protecting both its coastline and its residents’ wallets.

“I think we’re doing everything we need to make sure we’re adapting as a city. That also means ensuring that our coastal communities are not wiped out from a financial storm,” Daniel Zarrilli, director of the Mayor Bill de Blasio’s Office of Recovery and Resiliency, told the Observer in an interview at City Hall last week.

The flood insurance hikes are the result of events set in motion long before Sandy ever showed up on weather radar screens. In 2009, the Federal Emergency Management Agency, which administers the national government-funded flood insurance program, set out to map potential storm surges in the area for new flood insurance rate maps, which determine premium payments and how high a home must be above sea level to escape the risk of flooding. The last time FEMA set flood elevations for the city and coastal New Jersey was in 1983. Then, in 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act, aimed at getting the National Flood Insurance Program out of the red after Hurricane Katrina by better aligning a homeowner’s risk with their premiums, a nice way of saying: charging them more. Both changes, separate from each other and separate from Hurricane Sandy, mean more expensive flood insurance from homeowners, many of whom just spent their savings rebuilding.

“I shudder to think what these two conversations would have been like without Sandy,” Mr. Zarrilli said. “Because Biggert-Waters was still making increases go up, and the flood maps were still likely to change. And in the context of Sandy, people at least understood that it was a problem. I don’t think that we would have been able to get to the point where we got the Homeowners Flood Insurance Affordability Act passed if it hadn’t been following on the heels of Sandy.”

That act, co-written by former Staten Island Congressman Michael Grimm (who later resigned and was convicted of tax fraud), will slow down the premium increases by capping them at 18 percent a year—but, despite campaign signs dotting Staten Island that assert Mr. Grimm lowered flood insurance rates, it won’t stop the rates from going up steadily until FEMA feels the premiums are sufficiently risk-based. And those rates may go up again when new flood maps—which are currently being appealed by the city government—are adopted, probably in 2016.

“We are all concerned about flood insurance rate increases making housing unaffordable for working and middle-class homeowners, and causing the potential for displacement in working and middle class communities that today are thriving neighborhoods,” said Caroline Nagy, with the Center for New York City Neighborhoods, a nonprofit that promotes affordable homeownership.

Queens Assemblyman Phil Goldfeder put it more bluntly: “The single, most pressing question to every family that is recovering from Sandy is the future affordability of flood insurance.”

While the new flood maps are not final, preliminary maps released in 2013 showed that some 71,500 buildings that are home to 400,000 people will be in the flood plain when they’re adopted—up from 35,000 buildings and 218,000 people under effective 2007 maps. And parts of the city that have for decades already been in the flood zone are at a higher risk in the proposed maps, with higher base flood elevations—the amount of feet FEMA believes a house must be above sea level to avoid flooding. That means new buildings will have to be constructed higher off the ground to meet building codes. It also means existing homes that aren’t elevated high enough off the ground will face higher premiums.

A home being elevated in Staten Island to comply with flood maps, pictured in 2014, two years after Hurricane Sandy. (Photo by Cem Ozdel/Anadolu Agency/Getty Images) Cem Ozdel/Anadolu Agency/Getty Images

In June, the city filed an appeal of the maps challenging the model FEMA used to calculate the flood risk of Nor’easters—Mr. Zarrilli said the city’s experts believe base flood elevations on the resulting flood maps skew about a foot-and-a-half too high.

“We want to get that corrected, because we want to accurately reflect what the risk is, and we’re very cognizant of what the financial impact will be of these errors that we’ve found in the map,” he said. “So we want to get them corrected.”

But Mr. Zarrilli said the city was not looking in any way to downplay the risk of flooding in these areas. While the city is appealing the maps for insurance rate purposes, it has already adopted the maps into its building codes—meaning new structures will have to be built to FEMA’s higher base flood elevations, even if they’re eventually lowered on the insurance maps.

“We’re building to a higher standard than should even be required through all of our recovery work, and we want to make sure that in case the appeal is not successful for some reason, that homeowners are not hit,” he said.

Even if the appeal is successful, the new maps will mean higher base flood elevations for many homeowners, even if the bump up is smaller. One way to avoid premium increases is for homeowners to elevate their homes two feet above that base flood level—a pricey proposition but one that will pay off over time in saved insurance costs.

“Our perspective is, the best way to mitigate against flood risk is to remove the structure from the flood hazard—and that’s either through elevation or removal of the structure all together,” Andrew Martin, FEMA’s mitigation coordinator for the area including New York City, said in a telephone interview.

The city is paying for certain qualifying single-family homes in places like Staten Island and the Rockaways to be elevated, sometimes ten or more feet off the ground. But elevation is simply are not possible everywhere in New York City. Roughly 40 percent of the buildings that are in the FEMA flood plain cannot be elevated—row houses in Canarsie, brownstones in southern Brooklyn, brick apartment buildings on the Lower East Side, high-rises in the Financial District—and as such aren’t eligible for those premium savings.

“A lot of FEMA’s national flood insurance program policies don’t work as well for urban America. This isn’t the single family home on the one-acre plot of land where you can just easily elevate a house,” Mr. Zarrilli said. “There’s a financial impact to that, of course but at least physically it’s easier to elevate a house.”

Mr. Martin at FEMA agreed, citing his own neighborhood in South Brooklyn, full of brownstones blocks.

“You can’t raise just one of those and not the remainder of the adjoining structures,” Mr. Martin said. “We have to raise all of them or come up with a way that would provide mitigation, flood risk mitigation, on all of them without elevating.”

There are a handful of measures homeowners in attached properties can take to lower their premiums—one of them is to “abandon” the lowest floor as a living space, something that drastically reduces the space and the value of a home. Perhaps a bit more practically, homeowners can also fill in their basements with gravel up to ground level, and at ground level install flood vents that allow water to pass through into the building (which, depending on the home, may also cost some living space).

Then there are other options, like installing flood walls near their properties or using other wet or dry flood-proofing techniques, that will reduce the cost of floods but don’t qualify for reduced premiums—for now.

“We still haven’t figured out how exactly we’re going to apply them to flood insurance premiums yet,” Mr. Martin said. “Those recommendations will eventually turn into flood insurance premiums reduction possibilities. It’s just not today.”

A rendering shows a $335 million berm that will serve as both a park and coastal protection along the Lower East Side. (Rendering by BIG [Bjarke Ingels Group] via Rebuild by Design)

“Not today” is something homeowners are probably getting used to hearing when it comes to efforts to protect their homes from future storms. After Sandy, the city has amassed some $20 billion to spend on making the city more resilient for future storms, through projects like a system of levees and sea walls on the eastern shore of Staten Island and a massive, $335 million earthen wall and deployable flood barriers for a section of Manhattan stretching from the Lower East Side down around the Bowery. The projects strike a balance between protecting homes and keeping the waterfront open. On Staten Island, the floodwalls will double as a boardwalk. On the Lower East Side, the berm will be a park space.

In addition to keeping people safe and being amenities, those projects will also reduce premiums: if they’re certified by FEMA, the agency will take the walls into consideration and alter the flood maps to reflect their presence. That means nearby homeowners will probably be downgraded to a much less serious flood risk, making flood insurance much more affordable.

But, again—not today. Those projects, subject to the federal rules that come along with the federal dollars, are mostly in design stages.

“Most of the projects we’re talking about will not be in place before the maps might be updated, so there’s a window of time when the rate increases are going to keep going up, and new people are going to be mapped into the flood plain,” Mr. Zarrilli said. “That’s why we’re moving projects as aggressively as possible.”

New York isn’t the only place in America with old, hard to upgrade housing stock—nor is it the only city facing an increased threat from coastal storms due to sea level rise, so Mr. Zarrilli is hoping that the issues in New York will spur greater change to the flood insurance system when it’s up for renewal from Congress in 2017.

“It’s not just a New York City problem, it’s an urban america problem. So we want to make sure that FEMA recognizes, as we look forward to the 2017 reauthorization of NFIP, that we are trying to give them as many good ideas on things that need to be reflected in NFIP in the future,” Mr. Zarrilli said. “It takes Congressional action—that will be a hurdle to overcome—but we want to see a product at the end of the day that makes sense, to incentivize risk reduction and at the same time promote affordability.”

But some people think the city ought to bail out of the National Flood Insurance Program all together—chief among them Mr. Goldfeder, the assemblyman who represents several hard-hit coastal areas of Queens including Rockaway and Broad Channel. Flood insurance is administered by the federal government because the private industry wanted nothing to do with it—only people in flood zones tend to buy flood insurance, meaning insurers are more likely to pay out than they are on other kinds of policies.

Mr. Goldfeder, however, is looking to 1960s New York City for a model. When insurers began to stop offering homeowner policies in parts of the Bronx where crime and fires were rampant, the state created the New York Property Insurance Underwriting Association, a state-backed association aimed at providing insurance of last resort. Mr. Goldfeder wants to do the same for flood insurance, something insurance companies oppose.

“The key to insurance is about managing risk, and if we can find a way to spread the flood insurance risk over multiple entities in the private industry, then we’re going to find a way to solve the problem,” Mr. Goldfeder said. “Currently, the NFIP burdens all the risk and, frankly, doesn’t work.”

Mr. Martin, at FEMA, said several communities and the Association of State Flood Plain Managers have considered similar options. He said FEMA’s not necessarily opposed to it. “We do our best to work with every community,” he said. “There some communities that feel they might be better to that themselves.”

But Mr. Goldfeder’s idea, which he’s proposed in legislation, is unlikely to be adopted any time soon, if ever—yet another example “not today” for coastal New Yorkers.

So while they’re waiting on a fix, homeowners living in—or even near—what are projected to become new flood zones should take action.

“People should do everything they can to buy a policy now—even if they’re outside of the flood plain,” Mr. Zarrilli said. “That can set them on a trajectory starting from a potentially lower point.”